annual report - FIAT SpA

(€ million)
Continuing Operations
within due between one
one year and five years
At 31 December 2010
due
beyond
five years Total
Currency risk management 7,444 739 - 8,183
Interest rate risk management 4,593 3,426 1,388 9,407
Interest rate and currency risk management - - 1,005 1,005
Other derivative financial instruments 216 - 14 230
Total Continuing Operations 12,253 4,165 2,407 18,825
Discontinued Operations
Currency risk management 4,241 137 - 4,378
Interest rate risk management 834 1,664 635 3,133
Other derivative financial instruments 2 - - 2
Total Discontinued Operations 5,077 1,801 635 7,513
Total notional amount 17,330 5,966 3,042 26,338
Cash flow hedges
The effects arising on the income statement mainly refer to the management of the currency risk and, to a lesser
extent, to the hedges relating to the debt of the Group’s financial companies and Group treasury.
The policy of the Group for managing currency risk normally requires that future cash flows from trading activities
which will occur for accounting purposes within the following twelve months, and from orders acquired (or contracts in
progress), whatever their due dates, be hedged. As a result, it is considered reasonable to suppose that the hedging
effect arising from this and recorded in the cash flow hedge reserve will be recognised in income, mainly during the
following year.
The interest rate and currency derivatives treated as cash flow hedges were entered into by the North American
treasury for the purpose of hedging the bond issued in Euros and maturing in 2017; the amount recorded in the cash
flow hedge reserve will be recognised in income according to the timing of the flows of the underlying bond.
Where a derivative financial instrument is designated as a hedge of the exposure to variability in cash flows of a
recognised asset or liability or a highly probable forecasted transaction and could affect the income statement, the
effective portion of any gain or loss on the derivative financial instrument is recognised directly in equity. The
cumulative gain or loss is removed from other comprehensive income and recognised in the income statement at the
same time as the economic effect arising from the hedged item affects income. The gain or loss associated with a
hedge or part of a hedge that has become ineffective is recognised in the Income statement immediately. When a
hedging instrument or hedge relationship is terminated but the hedged transaction is still expected to occur, the
cumulative gain or loss realised to the point of termination remains in Other comprehensive income and is recognised
at the same time as the related transaction occurs. If the hedged transaction is no longer probable, the cumulative
unrealised gain or loss held in other comprehensive income is recognised in the Income statement immediately.
In respect of derivative financial instruments arranged by Continuing Operations, in 2010 the Group transferred losses
of €168 million (losses of €279 million in 2009) to income, net of the tax effect, previously recognised directly in other
comprehensive income. In respect of derivative financial instruments arranged by Discontinued Operations, in 2010
the Group transferred losses of €93 million (losses of €31 million in 2009) to income, net of the tax effect, previously
recognised directly in other comprehensive income. These items are reported in the following lines:
Fiat Group Consolidated Financial Statements at 31 December 2010 166